The Multi-Asset Perspective: August 2019


In this edition of the Multi-Asset Perspective, our Senior Fund Manager Kelly Chung said emerging market ex-Asia equities and gold tend to outperform the broader market as geopolitical tensions escalate and a global low interest rate environment persists.

China / Hong Kong Equities

Investor sentiment in Hong Kong are experiencing a double whammy due to the social unrest and trade war escalation. Economic data in both Hong Kong and the Chinese mainland continue with the weakening trend. Although valuation is now below historical average (1 standard deviation below mean for the MSCI Hong Kong Index and 0.5 standard deviation below mean for the MSCI China Index), the market needs some truly good news such as progression on the trade front or fiscal and monetary stimulus from China in order to improve the weak sentiment.

China A-shares

The weakening RMB due to the trade war escalation made a lot of companies relying on USD financing or having USD cost base suffering. Also, this creates concern on capital outflow although China has already improved its capital control. Economic data continues to weaken. The market needs another level of fiscal and monetary stimulus in order to lift the current weak sentiment.

Asia ex-Japan Equities

Weakening economies remain the biggest headwind for Asia ex-Japan equities. The fight to safety sentiment keeps the USD strong and Asian central banks are also rushing to cut interest rates. Valuation is becoming attractive although we need to see economic activities to pick up before the market turns more positive.

Emerging Market ex-Asia Equities

Emerging markets ex-Asia have plenty of room to cut interest rates given the controlled inflation. Also, reform policies in countries such as Brazil and Turkey are positive developments.

Japanese Equities

Valuation in Japan is the most attractive within Asia. We see stabilizing earnings revision after a decline in the last few months. However, the escalation of trade war between the U.S. and China and the tension between Japan and Korea have driven down investor sentiment, and the fight to safety sentiment caused JPY to strengthen. A strong JPY drives down the momentum in the equity market.

Asia Investment Grade Bonds

Asia investment grade bonds are benefiting from the significant fall in U.S. Treasury yields. However, rising China credit default swap (CDS) and the weaker corporate sentiment may cause the already very tight spread to start widen.

Asia High Yield Bonds

High yield bonds have a higher correlation with equities although they are enjoying from the fall in yields from a duration perspective. The RMB weakening hurts the sentiment in the Chinese property sector, which is a significant part of Asia high yield bonds.

Emerging Market Debt

Global risk aversion may cause money flow back to the safest assets such as U.S. Treasuries which may create some correction in emerging market bonds as the spreads have already been very tight.


Gold is a good hedge amid political uncertainties. Also, with global central banks on an easing mode, investors would put money into gold rather than negative yielding bonds.


Multi-asset investing offers lower volatility compared to a single traditional asset or a balanced portfolio. However, risky assets such as equities, credits, and commodities have become more correlated with each other amid the current market environment. Additional asset classes are therefore needed for better diversification. In an uncertain environment with lower yields, income becomes an important source of returns for investors.

The views expressed are the views of Value Partners Hong Kong Limited only and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. All materials have been obtained from sources believed to be reliable as of the date of presentation, but their accuracy is not guaranteed. This material contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Investors should note that investment involves risk. The price of units may go down as well as up and past performance is not indicative of future results. Investors should read the explanatory memorandum for details and risk factors in particular those associated with investment in emerging markets. Investors should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you.

This commentary has not been reviewed by the Securities and Futures Commission of Hong Kong. Issuer: Value Partners Hong Kong Limited.